228) Bond Coupon Rate & Maturity

If you have been reading about the Bond Fund pages in the Quarterly Reports, you will see percentage and  there are one or two years indicated after the bond issuer’s name. Have you wondered what the numbers mean?

Example 1: Sabah Development Bank Berhad – 5.50% / 2026

The number 5.50% indicates the yearly coupon rate.

The year 2026 indicates the bond maturity date.

This is a bond with plain structure. No callable feature.

Example 2: AmBank (Malaysia) Berhad – 5.20% /2022 / 2027

The year 2022 is the callable date. If the issuer don't call the callable bond (means repay the principal to investors) in 2022, then the issuer can have the option to call the bond after every 6 months during coupon payment date. The year 2027 will be the legal maturity where the issuer must pay back the principal to investors.

Example 3: CIMB Group Holdings Berhad – 5.80% / 2021 / 2116.

The year 2021 is the first call date. If the issuer don't call back the bond, they can call the bond back every 6 months during coupon payment time.

The year 2116 is a very long time from now. This is a perpetual bond structure, where the maturity date is after very long years like 2110, 2116, etc. There is still a maturity year indicated, just for system recording purposes.

When a bond investor see this kind of long maturity years, they know that this is a perpetual bond. It means a Bond without legal maturity dates.

Perpetual bonds normally gives a higher coupon rate. Although it is perpetual, the issuer normally call back the bond on the first call date.

Please contact your Unit Trust Consultant for more details.

Links to other related articles:

22) Bond Price Moves Opposite to Bond Yields
https://highlevelrules.blogspot.com/2017/06/bond-price-moves-opposite-to-bond-yields.html

48) Money Market Fund vs Bond Fund
http://highlevelrules.blogspot.com/2017/07/money-market-fund-vs-bond-fund.html

61) Unit Trust Bond Fund Vs Fixed Deposit
http://highlevelrules.blogspot.com/2017/07/unit-trust-bond-fund-vs-fixed-deposit.html

222) Does Bond Fund Move Opposite to Equity Fund

https://highlevelrules.blogspot.com/2019/03/222-does-bond-fund-move-opposite-to.html